There was no shortage of interesting news last week. Amazon decided that while everybody wants to rule the world of retail, it thinks it has the secret weapon to actually pull it off; frenemies ruling the FinTech landscape began to emerge as one of 2016’s more unusual trends; and bitcoin continued its perpetual figure skating routine on the razor’s edge between expectations of epic failure and world-crushing victory.
So, what to watch for this week?
Visa Checkout On The Move
Visa’s online checkout option for merchants got a few more thumbs up, as it announced some big merchant names to its Visa Checkout roster.
Starbucks, Walgreens, the NFL Shop (just in time for championship season), HSN, Match and Walmart.com will all be adding Visa Checkout to their digital commerce platforms.
“Delivering a seamless payment experience for our customers is a priority for us,” noted Ryan Records, VP of Starbucks global card, commerce and payment, when asked about the move to make Visa Checkout part of the Starbucks’ digital wallet repertoire.
Visa’s latest data release on the subject indicates that over 10 million consumer accounts have been activated and 600 financial institutions in 16 countries have signed on to Checkout since its launch 18 months ago.
ComScore data shows that Visa Checkout shoppers converted at a rate 51 percent higher than that of consumers who used other more “traditional” online checkouts. And, those customers, Visa reported, spent 7 percent more per order during the holiday season.
Visa also reported that Checkout showed strong promise as a customer acquisition tool. In a survey of six Visa Checkout merchants, roughly 46 percent of customers who used Visa Checkout during a promotional period were new to that specific retailer.
Visa’s data also underscored the growing use of mobile/digital as checkout methods. During the 2015 holiday shopping season, Visa reported that 45 percent of Visa Checkout shoppers used a smartphone, tablet or other mobile device in making their online purchases.
Six months earlier, that was about 33 percent.
“We are seeing tremendous Visa Checkout growth as we enter 2016 and are greatly encouraged by the enthusiastic response from consumers and merchants alike,” said Sam Shrauger, SVP of Visa’s digital solutions. “By re-engineering the Visa card for the digital world, we’re delivering a better way to pay through connected and mobile devices.”
The Closures Are Coming, The Closures Are Coming
The news for retailers out of the 2015 holiday season has been less than celebratory, particularly when it comes to customer foot traffic to retail locations. So, it should perhaps come as no surprise that many retail household names are planning on shrinking their real world footprint this year.
Last week kicked off with Macy’s announcement of its coming mass closures, and the fun just rolled on from there.
The most noted chop came via Sears, which announced that 2016 would see the U.S. with fewer Sears and Kmart stores to shop at, though exactly how big the cut will be remains to be seen.
“We are going to be closing some Kmart and Sears stores in various cities across the country. It is a very small percentage of our overall number of stores,” company spokesman Howard Riefs said. “Every year, we evaluate our store portfolio and make changes based on leases or stores with poor performance,” he added, before noting that Kmart would be the more affected chain.
A Reuters story notes that, as of the end of October, Sears Holdings — according to its latest financial disclosure — counted 952 Kmart stores and 735 Sears stores among its assets. Revenue at stores that have been open more than year (as of last month) fell 9.6 percent at Sears and 7.5 percent at Kmart during Q3 last year, drops that the company attributed to slow sales in apparel.
It is expected that Sears will announce its Q4 results in late February, but no specific date has been announced.
Also announcing closures last week was JCPenney, a highly anticipated move that managed to surprise by virtue of being less severe than analysts were predicting. Though widely expected to cut dozens of stores, it seems only seven are officially on the chopping block to be shuttered by April of this year.
There is, of course, still room for more cuts, but so far, none are officially planned.
A JCPenney spokesperson told Women’s Wear Daily that the stores being closed comprise less than 1 percent of the entire company’s brick-and-mortar footprint, so the brand is unlikely to miss the sales from these underperforming locations.
This is the latest better-than-expected news from the long-ailing JCPenney. The chain’s same-store sales in November and December rose by 3.9 percent, and CEO Marvin Ellison explained in a press release that the retailer’s increased emphasis on the digital side of the customer experience also made for a lucrative holiday season for JCPenney.
In more surprising closure news, Walmart kicked this week’s news cycle off with the announcement that even it will be shutting down some stores.
Walmart announced Friday (Jan. 15) that it would begin the process of shuttering a total of 269 stores, both in the U.S. and abroad.
CEO Doug McMillon said in a statement that it was a bitter pill for the retailer to swallow no matter how it tried to look at the facts.
“Actively managing our portfolio of assets is essential to maintaining a healthy business,” McMillon said in a statement. “Closing stores is never an easy decision, but it is necessary to keep the company strong and positioned for the future. It’s important to remember that we’ll open well more than 300 stores around the world next year. So, we are committed to growing, but we are being disciplined about it.”
Well, at least, it is not a bitter pill Walmart is swallowing alone these days.
Amex: The Hits Just Keep On Coming
It is hard to know what to make of things over at American Express these days.
Wednesday (Jan. 13) saw the the credit card company get its rating dinged by Goldman Sachs, which took its view of the firm from “buy” to “neutral.”
Could be worse, of course; could be a “sell” rating. But, then again, on Wall Street, hold ratings (which is what a neutral rating is, just using another word as a placeholder) can function as sell ratings.
This has a variety of complex explanations that can be boiled down to a simple one: If it ain’t a buy, it’s a sell. The price target was decreased from $89 to $72, which is still a not insignificant $8 and change above the most recent (post-call) close.
So, what does Goldman’s call mean? Shares could increase above current levels, but that’s predicated on whether the bottom line can swing 12 percent to 15 percent earnings per share growth, which isn’t happening until 2017, according to the Goldman report.
To get there, American Express could cut costs or sell off part of its lending portfolio if it is feeling like being very bold — a suggestion MPD CEO Karen Webster made last year.
At present, this does not seem likely, as “the company’s willingness and desire to do so are low,” according to the analysts. Against that hesitancy, other credit card firms offer relatively better value profiles, including Discover Financial Services and Synchrony Financial, added Goldman.
Now, it could be the case that Goldman, giving the nod to the operational challenges that lie before the credit card behemoth, simply is playing catchup to smaller players in the sell-side pantheon. Having a neutral stance on Amex shares is no heroic feat these days.
Investors have followed that same reasoning, which is why Amex’s market cap is $62 billion, when roughly a year ago it was $92 billion. Thirty billion dollars of value is a lot to lose.
So, what’s next for American Express?
The upcoming 2015 fourth quarter and full-year financial report next week might give some guidance as to how the credit card company plans to position itself into the new year. But even before that, Kenneth Chenault, chairman and CEO of the company, will deliver a keynote appearance at the NRF show next Tuesday.
The topic will be “Leading Digital Transformation in a Rapidly Changing Industry,” and all ears, at least on Wall Street and here at PYMNTS, will be tuned in to hear just how Chenault plans to tackle that transformation.
So, what did we learn this week? It is a good time to be Visa Checkout and a hard time to be a physical retailer or American Express. But the year is young, and a lot can happen. So, stay tuned.